SouthBridge investment bank’s pan-African ambitions

The first stone of what would become SouthBridge was laid in Cotonou in August 2015. Donald Kaberuka, the outgoing president of the African Development Bank (AfDB), was in town for a final official meeting with Beninese President Thomas Boni Yayi, as part of his farewell tour.

He took the opportunity to have lunch with Lionel Zinsou, an old acquaintance. The latter, who had only been Prime Minister of Benin for two months, was considering leaving politics at the next elections.

Zinsou told him: “From April 2016, I will devote myself to what I have wanted to devote myself to for years. The former Rothschild partner and CEO of French private equity firm PAI wanted to devote the rest of his career to providing financial advice and investing in Africa. Kaberuka, who was Rwanda’s finance minister for eight years, shared this desire. The two men agreed to found a new pan-African investment bank.

Zinsou eventually ran for the presidential elections in March 2016, but lost. Beaten by the independent candidate Patrice Talon, he then devoted himself the following year to the creation of the start-up.

A large address book and immediate visibility

The name “Kaberuka Zinsou Bank” was quickly dropped because they wanted to create an institution that would survive them. In the end, they chose “SouthBridge” as their business would primarily take place in the southern hemisphere and focus on integrating African economies.

They chose an English name because they hoped to do business across the continent. About ten people close to the company – entrepreneurs from East and West Africa – invested their capital in a modest fundraising campaign.

The business got off to a flying start. Even before being officially incorporated or having its own premises, SouthBridge got its first job: advising the French hotel group Accor in the creation of an African fund of 500 million dollars. But how would they manage to gain a lasting foothold in a sector where competition is fierce and contracts are scarce?

In any case, Zinsou and Kaberuka’s address book gave SouthBridge immediate visibility. “When you are president of the AfDB, you know everyone across the continent. This was also the case in French-speaking Africa, ”Zinsou told us during a videoconference interview at the end of last year from his Paris apartment.

Their first meetings took place with Patrice Talon, Denis Sassou Nguesso and Ali Bongo Ondimba. “We spoke with many presidents and finance ministers to get an idea of ​​their satisfaction with the services they received,” recalls the former Prime Minister of Benin. They have the impression of these meetings that governments are fed up with advisers “not necessarily all very high in the hierarchy, neither in experience nor in age, who come from New York or London to spend a few hours there”, and who “employ clichés about Africa,” Zinsou said. Message received. SouthBridge should be offering a different kind of service than what these men are getting.

“A humble, laborious and slow job”

In any case, these meetings at the top foreshadowed the kind of activity in which SouthBridge would be engaged. Fast forward to 2020 and the investment bank was supporting the implementation of the Djibouti Sovereign Fund, which aims to reach a size of 1.5 billion euros within ten years.

In the same year, SouthBridge advised the Togolese government on two issues: the creation of a public-private partnership, backed by € 200 million in investments, with the Singaporean agro-industrial group Olam; and the sale of a majority stake in Togo’s New Cotton Company worth € 15.3 million to Olam. The Sovereign Council represents 60% of SouthBridge’s business, Zinsou tells us.

“They only do political affairs,” explains a competitor, for whom the contacts of the founders mask the lack of experience of the operational teams. “We are veterans of important functions, so we know the people. Yes, that helps, ”says Zinsou. “But public relations, social relations and the address book are not the most important part. In reality, it is humble, laborious and slow work.

Varied and fierce continental competition

In December 2018, SouthBridge announced that it had recruited British-Nigerian Andrew Alli, a big name in African finance. The man who had previously headed the multilateral financial institution Africa Finance Corporation for ten years points out that SouthBridge is not just a sovereign council.

He cites, as an example, the support of the Kenya Commercial Bank during its takeover last November of two East African banks owned by Atlas Mara. He also rigorously defends the expertise of his staff, which includes former employees of Goldman Sachs and Deloitte.

SouthBridge has offices in Paris, Abidjan and Kigali, with expansion plans in London and Johannesburg. Alli is based in Lagos. By setting up offices in numerous locations, SouthBridge hopes to establish a Pan-African presence.

But the competition is fierce, and particularly on the African continent. Lazard and Rothschild dominate the French-speaking market, while the international banks of Citi, Goldman Sachs, Standard Chartered and Standard Bank are well established in the English-speaking world. “We are a small company compared to Lazard and Rothschild,” says William Ediko, partner at SouthBridge.

Another challenge for SouthBridge is to compete with smaller Pan-African investment banks with a high level of expertise. These include the Russian Renaissance Capital, the French AM Capital and the Egyptian EFG Hermes Frontier as well as numerous national companies, including Capital Trust in Morocco and KeysFinance in Côte d’Ivoire.

Signing of around 30 contracts, from telecoms to energy

Faced with this competition, SouthBridge – according to Zinsou – did not expect to land any contracts in its first three years of existence. In 2020, however, the investment bank had already signed around thirty contracts. “That’s a lot,” says Ali Khalpey, CEO of EFG Hermes Frontier. His investment bank, created shortly before SouthBridge and present in Nairobi and Lagos, is currently working on half a dozen contracts, he tells us.

SouthBridge’s rise seems all the more remarkablee because they have signed 12 contracts since the arrival of the Covid-19 pandemic in Africa in February 2020. SouthBridge has worked, among others, in Morocco, Senegal, Guinea, Mali, Ivory Coast, Nigeria, Cameroon, DRC, Rwanda and Tanzania in the telecoms and energy sectors.

In addition to governments and businesses on the continent, the investment bank’s clients include several multilateral development banks, including the West African Development Bank (BOAD) and the Trade and Development Bank (TDB), the Bank of development of the Common Market for Eastern and Southern Africa.

SouthBridge’s doctrine has, in part, enabled them to win a wide variety of contracts. “We are ready to help a government with a GDP of $ 2-500 billion and a company with a turnover of $ 30- $ 30 billion,” Zinsou says. The idea is to support clients in their growth rather than limiting themselves to the giants, as many international investment banks do. In any case, private equity firm Development Partners International (DPI) has been impressed with SouthBridge’s geographic footprint and is considering using their services.

“They may be able to meet the needs of investors like us who are looking to invest on a pan-African basis,” explains Sofiane Lahmar, partner at DPI. “It’s better to have a single point of entry than talking to 20 people in 20 large African countries. It would be a game changer. “

Three investment vehicles to raise $ 600 million

However, Zinsou acknowledges that SouthBridge’s hyperactivity poses scheduling and staffing challenges, given its small size. Frannie Léautier, partner at SouthBridge, confirms that the pace is very fast since she has worked on 10 contracts since last June.

The MIT graduate and World Bank veteran, who was in charge of asset management at TDB after a brief stint as vice president of the African Development Bank, now chairs SouthBridge Investment: a new pan-African company from private equity and asset management which aims to complement SouthBridge’s services.

Three investment vehicles are being developed, targeting banking institutions, the industrial sector and SMEs managed by women. Ultimately, they are expected to raise between $ 600 million and $ 800 million in total. However, the pandemic could slow this dynamic.

“Clearly, in the current context, raising funds in Africa is very difficult,», Explains a competing fund manager. However, Léautier claims to have found investors ready to follow SouthBridge on these three vehicles. She also claims to make the crisis an asset. After all, some sectors have been successful in growing their businesses during the pandemic and others will need capital to recover.

Disagreements and controversies in Abidjan and Casablanca

Other projects have been less successful. Serge Thiémélé, an Ivorian specialist in transaction advice and former senior manager of EY in French-speaking Africa, is said to have canceled the proposed merger between SouthBridge and his consulting firm First Capital, following disagreements over the commercial strategy and the terms of the contract. ‘union.

Zinsou says he’s disappointed. Serge Thiémélé, a former SouthBridge employee, has since left the investment bank and does not wish to comment. According to our information, he would have preferred to retain his independence as well as his focus on Côte d’Ivoire, rather than immerse himself in The SouthBridge Pan-African Project. However, First Capital will continue to work with SouthBridge on certain projects.

Another merger between SouthBridge and A&I – a sister company in Morocco specializing in strategic advice – is also still pending. SouthBridge A&I has been the subject of heated debate in the kingdom since they tried to obtain a contract from the Ministry of Tourism.

This was due to the fact that his founding partner Hassan Belkhayat and Lamia Boutaleb, the Secretary of State for Tourism, were both involved in the National Rally of Independents [National Rally of Independents] (RNI). Belkhayat’s colleagues explained to us that he kept his distance from this issue and that the contract in question had never been signed.

As for SouthBridge, they assured that the merger with A&I would still take place, possibly this year. “There is no immediate plan to merge,” SouthBridge says, noting that the two companies remain close.

Despite SouthBridge’s remarkable beginnings in the consulting business, Zinsou wants to keep a cool head: “We may have a very good year and nothing the following year. A note of optimism, however, is that SouthBridge has already completed several contracts for some clients. “In this business where turnover is very volatile, it is the recurring customers that count”, concludes the managing partner.

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